Wall Street eats up Wendy\’s stock as McDonald\’s shares go cold

Bryan Hong

McDonald\’s restaurant in Downey, Calif.

McDonald\’s Corp.\’s
is down 1.6% on Thursday as one of the worst-performing of the 30 stocks in the Dow Jones Industrial Average
after the fast food monolith posted its first drop in same-store sales since 2003.

McDonald\’s signaled trouble on Oct. 19 when it said its fourth-quarter comparable sales were trending negative, but its October same-store sales drop of 1.8% came in worse than the expectation for a 1.07% decline in a survey by Consenus Metrix.

In the U.S., same-store sales fell 2.2% in October, with McDonald\’s citing, \”modest consumer demand and heightened competitive activity\” which offset the impact of its local Dollar Menu advertising.

Some of that competition is coming from Wendy\’s
, up as much as 5% during the session despite losses in the broad equities market. Earlier this year, Wendy\’s beat out Burger King
for the No. 2 fast food spot in the U.S. based on restaurant sales.

Wendy\’s adjusted third-quarter earnings of 3 cents a share fell two cents short of the average analyst estimate in a FactSet survey, the company said Thursday. But Wendy\’s sweetened the deal for shareholders by doubling its dividend to 4 cents a share and setting plans to buy back $100 million in stock.

Adding some pepper to its prospects, the company said it expects its fourth-quarter results to benefit from the 47 restaurants that reopened late in the third quarter and early in the fourth quarter with a freshened image. In another boost, the Dublin, Ohio, firm also managed to increase its third-quarter same-store sales by 2.7%.

McDonald\’s is accustomed to competition. It\’s taken on Starbucks Corp.
in recent years by ramping up its coffee and breakfast offerings, for example. Wider use of bacon in its meals has also driven interest.

And it\’s got plenty of resources in its pocket. With a market cap of $87 billion and a presence around the globe, McDonald\’s dwarfs Wendy\’s market value of less than $2 billion.

But sometimes when you get really big, it\’s harder to grow. At least for the moment, Wall Street seems to prefer Wendy\’s menu for investors.

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